* Newspapers report EU considering Greek bailout
* Greek/German 10-yr bond spread narrows
* Euro pares losses against dollar
* MSCI All-Country World Index down for 8th straight session
LONDON, Jan 29 (Reuters) - European stocks rose, the euro recovered and the premium it costs Greece to borrow fell on Friday after newspaper reports said the European Union was considering bailing out Greece.
Similar reports on Thursday were denied by German and French officials, though, and global investors remained nervy about Athens' fiscal problems, with world stocks down and on track for the eighth straight session of losses.
Global equities measured in MSCI All-Country World Index <.MIWD00000PUS> dropped 0.1 percent, falling for the eighth day in a row and on track for the longest losing run since July 2008.
The pan-European FTSEurofirst 300 <
> index, however, rose 0.9 percent, recovering from the previous session's fall, while Greece's benchmark < > advanced 1 percent.In Asia, Japan's Nikkei average <
> lost 2.1 percent to a six-week closing low.The Financial Times quoted what it said were high-level EU officials as saying that Greece would in the last resort receive emergency support from other euro zone governments and the European Commission.
Markets' suspicion that something is in the works also helped the Greek/German 10-year government bond yield spread tighten and the euro recover from a six-month low against the dollar and a nine-month low versus the yen.
The premium investors demand to hold Greek government bonds rather than benchmark German Bunds narrowed to 379 basis points from 396 bps in late Thursday trade. The spread blew out to a record 405 bps on Thursday on investor fears that Athens may not be able to service its heavy debt.
"It was just such a violent move out and we are just seeing a slight retracement of that this morning. The headlines are also helping. The underlying consensus seems that the EU is going to bail out Greece eventually," said a trader in London.
FEARS
Financial markets are gripped by the fear Athens will not be able to service its heavy debt, putting pressure on the euro and even raising speculation as to whether Greece could be forced out of the currency bloc.
The euro was up 0.1 percent against the dollar at $1.3981 and was up 0.5 percent at 126.16 yen <EURJPY=>, while the dollar <.DXY> was steady against a basket of major currencies.
"Even though today we may see some sort of bounce, I think the problems are still haunting us," said Philippe Gijsels, senior equity strategist at Fortis Bank in Brussels.
"We still have the situation with Greece and the problem is shifting to Portugal. Obama is also introducing a lot of anxiety ... though Bernanke was reappointed which has lifted some of the uncertainty."
Overnight the U.S. Senate backed Ben Bernanke for a second four-year term running the Federal Reserve. [
]Investors have also been nagged this week by fears that the global economic recovery may be losing momentum, China's steps to cool its surging economy and political and regulatory wrangling in Washington.
Yields on benchmark 10-year U.S. Treasuries <US10YT=RR> were up 1 basis point at 3.650 percent, while those on 10-year Bunds <EU10YT=RR> were up 2 basis points at 3.213 percent. In the commodity market, copper prices <MCU3> fell for the fourth consecutive session, down 0.8 percent, but oil prices <CLc1> rose to trade at $74 a barrel. (Additional reporting by Emelia Sithole-Matarise and Joanne Frearson in London; editing by Patrick Graham)